Australia, Europe Link Emissions Trading Systems

European climate commissioner Connie Hedegaard and Australian climate change minister Greg Combet today announced that Australia and Europe will link their emissions trading systems, which will allow businesses to use carbon trading units from either trading scheme for compliance under either system.

A full two-way link between the two cap and trade systems — the first full international linking of emission trading systems — will begin no later than July 1, 2018.

Together, the linked Australian and European emissions trading systems will be the world’s largest carbon market, according to the EU and the Australian government.

As an interim arrangement, a partial link will allow Australian businesses to buy and use European Union Emissions Allowances to meet up to 50 percent of their liabilities under the Australian scheme from July 1, 2015 until the full link takes effect.

Australia’s carbon tax, which took effect July 1, requires about 300 companies to pay A$23 (US$23.50) per metric ton of carbon emissions.

To facilitate linking, the Australian government has said it will not proceed with the implementation of its price floor and will limit the use of Kyoto Protocol-eligible international units. Additionally, Australia will set its price ceiling in line with the expected 2015-16 European allowances price.

Linking will provide business with access to more and lower cost emissions abatement units, and will create a more liquid carbon market that reduces carbon pollution at a lower cost, according to Australia and the EU. They expect to have signed a full link agreed by mid-2015.

Meanwhile a July survey found 62 percent of Australian businesses in the architecture, building, construction and design industries do not believe the government’s carbon tax will lead to a reduction in carbon emissions.

In May, the UK began offering small emitters and hospital installations the opportunity to opt out from the EU emissions trading scheme beginning in 2013, as part of the government’s red tape-cutting initiative. The scheme could save industry up to £80 million ($125) million from 2013-2020, while accounting for about 1 percent of UK EU ETS emissions, according to the UK Department of Energy and Climate Change.